Wealth Tax

May 8, 2009

Wealth tax is charged for every assessment year in respect of net wealth. Wealth tax is also a direct tax just like income tax computed on net wealth of an assessee. But it is charged on the amount of net wealth exceeding Rs. 15 Lacs.

Rate of wealth tax is 1%.

Wealth tax is charged on the net wealth of an assessee valued as on valuation date. The valuation date for chargeability of wealth tax is 31st March of the financial year.

Net wealth means taxable wealth. Broadly speaking it represents the excess of assets over debts.
The term assets means ;
(i) Guest house, residential house or commercial building.
(ii) Motor Cars.
(iii) Jewellery, bullion, utensils of gold silver, etc.
(iv) Yachts , boats and aircraft.
(v) Urban land, and
(vi) Cash in hand

Public Provident Fund Account

May 8, 2009

Public Provident Fund account is a tax saving instrument . Many people use this account to save their taxes. There are many benefits of this account other than it is used as a tax saving instrument. Any person whether he be man or women, married or bachelor salaried or self employed must have a PPF account. A PPF A/c is opened for a term of 15 years and is used for investing for a long term. This term of 15 year does not include the year in which it is opened. During a financial year a maximum of Rs. 70,000/- can be invested into the account.

A PPF a/c has many of its advantages:
(i) A PPF a/c is opened for period of 15 years.
(ii) Interest received on amount invested is also tax free.
(iii) A PPF a/c can be operated with a minimum investment of Rs. 500/- per year also.
(iv) A loan can also be obtained on PPF A/c.

If a person has defaulted in investing the minimum in his PPF a/c he can reactivate his account by investing the minimum amount required and paying a nominal penalty of Rs. 50/-.

Year Ending Profits

March 16, 2009

With this another Financial Year coming to an end here are some important steps to be taken in the form of links :

1. List priorities while choosing tax-saving scheme

http://www.cainindia.org/news/3_2009/list_priorities_while_choosing_taxsaving_scheme.html

2.  Personal Tax: 10 things to do before March 31

http://www.cainindia.org/news/3_2009/personal_tax_10_things_to_do_before_march_31.html

3. Be careful while filing your tax return

http://www.cainindia.org/news/2_2009/be_careful_while_filing_your_tax_return.html

Read all the links carefully to make tax returns easier.

Income Tax rates applicable for A.Y. 2009-10

January 30, 2009

Tax Rates as applicable for different persons for the A.Y. 2009-10 are as under:

 

For resident woman (who is below 65 years of age at any time during the previous year:

 

Net Income range      Income Tax rates                   Surcharge       Education Cess

 

Upto Rs. 1,80,000       Nil                                            Nil                    Nil

Rs. 1,80,000- Rs.         10% of  (total income               Nil                    3% of Income Tax

3,00,000                      minus Rs. 1,80,000)

Rs. 3,00,000- Rs          Rs. 12,000 + 20% of (total

5,00,000                      income minus Rs. 3,00,000)      Nil                    3% of Income Tax

Above Rs. 5,00,000     Rs. 52,000 + 30% of (total

                                    income minus Rs. 5,00,000)      Nil                    3% of Income Tax

 

Note : Surcharge @ 10% is applicable if Net Income Exceeds Rs. 10 lacs

 

For resident senior citizen (who is 65 years or more of age at any time during the previous year:

 

Net Income range      Income Tax rates                   Surcharge       Education Cess

 

Upto Rs. 2,25,000       Nil                                            Nil                    Nil

Rs. 2,25,000- Rs.         10% of  (total income               Nil                    3% of Income Tax

3,00,000                      minus Rs. 2,25,000)

Rs. 3,00,000- Rs          Rs. 7,500 + 20% of (total

5,00,000                      income minus Rs. 3,00,000)      Nil                    3% of Income Tax

Above Rs. 5,00,000     Rs. 47,500 + 30% of (total

                                    income minus Rs. 5,00,000)      Nil                    3% of Income Tax

 

Note : Surcharge @ 10% is applicable if Net Income Exceeds Rs. 10 lacs

 

 

For any other individual, every HUF/AOP/BOI/artificial judicial person-

 

Net Income range      Income Tax rates                   Surcharge       Education Cess

 

Upto Rs. 1,50,000       Nil                                            Nil                    Nil

Rs. 1,50,000- Rs.         10% of  (total income               Nil                    3% of Income Tax

3,00,000                      minus Rs. 1,50,000)

Rs. 3,00,000- Rs          Rs. 15,000 + 20% of (total

5,00,000                      income minus Rs. 3,00,000)      Nil                    3% of Income Tax

Above Rs. 5,00,000     Rs. 55,000 + 30% of (total

                                    income minus Rs. 5,00,000)      Nil                    3% of Income Tax

 

 

Firms:-

A firm is taxable at the rate of 30% for the Assessment Year 2009-10.

Surcharge: 10% of Income Tax if net income exceeds Rs. 1 Crore.

                   Nil if income does not exceed Rs. 1 Crore.

Education Cess: 3% of Income Tax + Surcharge( if applicable).

 

Companies:-

A domestic company is taxable at the rate of 30% for the Assessment Year 2009-10.

Surcharge: 10% of Income Tax if net income exceeds Rs. 1 crore.

                   Nil if income does not exceed Rs. 1 Crore.

Education Cess: 3% of Income Tax + Surcharge( if applicable).

Diwali Greetings

October 28, 2008

WISHING ALL OF YOU A VERY HAPPY AND PROSPEROUS DIWALI. MAY THE GODESS LAXMI EMPOWER YOU AND YOUR FAMILY WITH HER NINE BLESSINGS* NAME* FAME* WEALTH* HAPPINESS* HUMANITY* GYAN* BHAKTI* SHAKTI*

HAPPY DIWALI

Tax saving Instruments

October 10, 2008

As per the Indian Income Tax Law in computing the total income of an assessee being an individual or HUF benefit of deduction to the aggregate of Rs. One lakh rupees is given.  The deduction is available provided the amount is invested /deposited or paid by the assessee in any of the items listed in section 80C of the Act. The most common type of investments/payments for which deduction is available are:

  1.  
    1. Payment of Life Insurance Premium for himself, spouse and children and in case of an HUF payment of Life insurance Premium for any of member thereof.
    2. Contribution to Public Provident Fund. (max. upto Rs. 70,000/-)
    3. Contribution by employee to Recognised Provident Fund.
    4. Contribution by employee to Appproved Superannuation Fund.
    5. Any security specified by Central Government for this purpose.
    6. Contribution to Unit Linked Insurance Plan.
    7. Payment of tution fees for children for full time education in India (available for two children only)
    8. Repayment of Housing Loan taken from Central Govt, State Govt or Bank and other specified institutions.
    9. Term Deposit for not less than 5 yrs from scheduled bank and which is in accordance of scheme.
    10. Five year deposit in Post Office Time Deposit Scheme.
    11. Subscription of Units of Mutual Fund Specified for this purpose.
    12. Subscription for National Saving Certificate VIII issue.

 

 

Full Text of this section on available on the below mentioned link.

http://law.incometaxindia.gov.in/TaxmannDit/Displaypage/dpage1.aspx?md=2&typ=cn&yr=2008&chp=194

Other Profits

October 3, 2008

Some special points to remember:

 

  1. If an individual makes a gift in cash or by cheque to his spouse and that money is utilized by the spouse for purchase of an asset . The income earned by the spouse from that asset will not be clubbed in the income of the individual.
  2. In order to invoke clubbing provisions there must be relation of  husband and wife. That means if a person transfers asset to his would be spouse before marriage income arising from such asset will not be included in the income of  transferor.
  3. Negative income is also income. Under the Income Tax Act income does not means positive income only. The term income includes negative income or loss also.
  4. Income from accretion to asset is not taxable in the hands of the transferor.
  5. Income from saving out of pin money  is not included in the income of husband.
  6. Income of minor child is clubbed with the income of the parent whose income after excluding the share of minor’s income is greater.
  7. If trust is created for the benefit of minor child and income during minority of child is being accumulated and added to corpus of trust and income from increased corpus is given to the child after attaining majority, clubbing provisions are not applicable.
  8. A loan is not transfer for the purpose of this chapter.

Clubbing of Income

October 1, 2008

In the Indian Income Tax Act there are provisions of Clubbing of Income.

 

But , the question is What is Clubbing of Income and why it is so?

 

Clubbing of income means Income of other person included in assessee’s total income, for example: Income of husband which is shown to be the income of his wife is clubbed in the income of Husband and is taxable in the hands of the husband.

     Income of a minor child is taxable in the hands of his parents.

 

Why it is so?

Under the Income Tax Act a person has to pay taxes on his income. A person cannot transfer his income or an asset which is his one of source of his income to some other person or in other words we can say that a person cannot divert his income to any other person and says that it is not his income. If he do so the income shown to be earned by any other person is included in the assessee’s total income and the assessee has to pay tax on it.

For example: A purchased a house property in the name of his wife B. A let out this house property . The rental income earned by A in name of his wife B is taxable in the hands of A.

 

Clubbing of Income takes place in the following cases:

1. Transfer of income without transfer of Asset:  If any person transfers income without transferring the ownership of  the asset , such income will be taxable in the hands of the transferor. Ex. X owns 4000, 14% debentures of A ltd. of Rs. 100 each , he transfers interest income to his friend Y without transferring the ownership of Debentures . In this case although interst will be received by Y but it is taxable in the hands of X.

 

2.Revocable transfer of Asset: If any person transfers any asset to any other person in such form and condition that such transfer is revocable at any time during the lifetime of the transferee , the income earned through such asset is chargeable to tax as the income of the transferor. For ex. X transfers a house property to A. However , X has right to revoke the transfer during the life time of A . It is a revocable transfer and income arising from the house property is taxable in the hands of X.

 

3. Remuneration to Spouse: An individual is chargeable to tax in respect of any remuneration received by the spouse from a concern in which the individual has *substantial interest. This provision has an exception. If the remuneration is received by spouse by the application of technical or professional knowledge or experience clubbing provisions will not take place. For ex. X  has substantial interest in A ltd. and Mrs. X is employed by A ltd. without any technical or professional qualification. In this case salary income of Mrs. X shall be taxable in the hands of X.

 

4. Income from assets transferred to spouse: Where an asset is transferred by an individual to his spouse directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart, any income from such asset is deemed to be the income of the transferor. For ex.  Mrs. A transfer’s 100 debentures of IFCI to her husband without adequate consideration. Interest income on these debentures will be included in the income of Mrs. A.

 

5. Income from asset transferred to son’s wife: If an individual , directly or indirectly transfers asset , without adequate consideration to son’s wife , income arising from such asset is included in the income of the transferor. For ex.  Mrs. A transfer’s 100 debentures of IFCI to her son’s wife without adequate consideration. Interest income on these debentures will be included in the income of Mrs. A.

 

6. Income from asset transfer to a person for the benefit of spouse/ son’s wife: If an individual , directly or indirectly transfers asset , without adequate consideration to a person or an association of persons for the benefit of his/her spouse /son’s wife , income arising from such asset directly or indirectly is included in the income of the transferor. For Ex. X transfers Government bonds without consideration to an association of persons, subject to the condition that , the interest income from these bonds will be utilized for the benefit of Mrs. X or Mrs. X son’s wife . Interest from bonds will be included in the income of X

 

7. Income of a minor child: All income which arises to the minor shall be clubbed in the income of his parents. Income will be included in the income of that parent whose total income is greater.  This case has two exceptions.(1) Income of minor child suffering from specified disability . (2) Income of minor child on account of manual work or involving application of his skill/talent etc.

 

 

*Substantial Interest: An individual is deemed to have substantial interest if he beneficially holds equity shares carrying not less than 20% voting powering case of a company or is entitled to not less than 20% of the profits in case of a concern other tan a company , at any time during the previous year.

Banking Cash Transaction Tax

August 22, 2008

In order to trap the black money our honorable Finance Minister Mr. P. Chidambaram has levied Banking Cash Transaction Tax in the Finance Act 2005. This tax is levied on cash withdrawls from the bank above the specified limits. This tax is applicable from all cash withdrawls from June 1, 2005.

This tax here in fourth referred as BCTT is levied on cash withdrawl (by whatever mode) on any single day from an account (other than saving bank account) maintained with any bank in India (except the state of Jammu and Kashmir) exceeding the following amount:-

Account (not being saving

Bank a/c) maintained by-                       Amount of withdrawl

Any individual or HUF                                     Rs. 50,000

A person other than any individual or HUF            Rs. 1,00,000

 

 

Term Deposit in the name of                    Amount of withdrawl

Any individual or HUF                                       Rs. 50,000

A person other than any individual or HUF           Rs. 1,00,000

BCTT is levied @ 0.1%  of the value of every such taxable banking transaction.

In the Finance Act 2008 our finance minister has withdrawn this tax from 01 April 2009. This means that on or after 01st April 2009 any sum of cash can be withdrawn from the bank account without paying any tax. As per him the purpose for which this tax was levied has been fulfilled . But no one know that whether the purpose has been fulfilled or the tax has been withdrawn as part of a statregy to capture the vote bank in the forthcoming elections.

Permanent Account Number (PAN)

August 21, 2008

I think that my readers are very familiar with this term. Under the Income Tax Act

every assessee is liable to get PAN before he files his tax return  in the department.

 PAN is a unique 10 digit number which is issued by the income tax office to the

person applying for it. Every digit in a PAN signifies a meaning in itself.

 

To know about the need of PAN and its importance click on the below link

http://www.incometaxindia.gov.in/PAN/Overview.asp

 

This contains a series of FAQ’s on PAN which is issued by the Income Tax

Department.

 

Hope it will be useful to you.